The decentralized world pivots around the idea of providing power and ownership to users. However, it requires the participation of only serious users to achieve success for a decentralized project.
An ideal way to accomplish this is by creating a decentralized autonomous organization (DAO) – a social organization governed by a transparent computer code instead of a central government or any leaders. The participants invest their money in a DAO project in exchange to earn voting rights in the project. The higher the amount of money invested, the greater the voting power.
A type of utility token, called the DAO governance token, is issued to users to represent their stakes in the DAO.
More about the governance token
A decentralized autonomous organization is a blockchain-driven organization governed by the DAO governance token. Any individual who buys and holds the governance tokens gains the power to vote on crucial matters related to the DAO.
The idea behind DAO token development is to eliminate central management of the organization and provide authority into the hands of the stakeholders.
How does a DAO token work?
A decentralized autonomous organization is governed by a code or a smart contract – which comprises the foundational rules of how a DAO will operate. These rules cannot be amended unless the community members (or governance token holders) for it. As various decisions need to be made in the DAO, such as operational workflows, incentive structures, and governance systems, the need for a smart contract is indispensable.
Users fund a DAO’s growth by buying its native tokens
Individuals or entities interested in contributing to the growth of a decentralized autonomous organization can purchase its native tokens or DAO governance tokens. DAO governance token holders are provided with voting rights proportional to their holdings and they gain equity in the DAO to shape its future.
Governance tokens influence treasury management
In addition to voting rights, governance token holders can work for their DAOs to get incentivized with governance tokens.
A DAO governance token has some great benefits, including the following:
Governance tokens eliminate the conflict of interest, which is often prevalent in centralized finance. Decentralized governance, driven by governance tokens, gives the management power into the hands of a community of stakeholders while aligning the interest of users and the organization.
As each token equals one vote given by the token holder, it leads to equitable decision-making. The details of every vote can be seen by other community members, which reduces the chances of cheating.
What is next for governance tokens?
Given the huge potential of governance tokens, they are poised to gain wider utility in more sectors. As DeFi (decentralized finance) and DAO gain momentum, industries like gaming are anticipated to embrace this governance model.
Governance tokens will continue to evolve to resolve problems as they emerge. New ways to enhance the voting process are more likely to evolve, and we may witness novel methods to delegate votes.
Questions to ask when building a governance token
If you are planning for decentralization governance token development for your DAO, you should ask yourself the following questions:
Does your project resemble a country or a corporation?
A corporation is profit-seeking, and therefore, optimizes for shareholder value. On the contrary, country-like projects cater to more diverse stakeholders, thereby seeking more democratic systems of governance.
What level of control do you want to provide your community?
You need to identify the level of control you are willing to provide your stakeholders. Too little or too much control has its set of pros and cons, so make your decision wisely. This is when you can seek assistance from DAO token development experts.
Why Anter for DAO token development?
Antier is equipped with a team of 600+ blockchain and domain experts who offer end-to-end services to navigate your governance token development journey. With in-depth knowledge and real-world experience building DAO tokens, we can effectively transform your use case into a successful project to fuel your business growth.
In addition to providing development services, we offer personalized consulting solutions to help you make well-informed decisions related to your project.
Connect with our subject matter experts to discuss your business use case and accelerate your DAO token development process.